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Home Publications Blogs Beat the Press Housing Market: Ever Hear of It?

Housing Market: Ever Hear of It?

Tuesday, 01 February 2011 06:01

Yeah, it's a little known market that involves every household in the country and is valued at more than $16 trillion. According to some accounts, it had something to do with the recession.

It seems the media still don't really know much about the market, otherwise we would have seen news articles on the Census Bureau's report on vacancy rates for the 4th quarter. The report showed a substantial drop in vacancy rates from both the last quarter and the fourth quarter of 2009. While vacancy rates are still at historically high levels, this is the first clear decline from the peak vacancy rates reached in 2007. Under the theory that prices are affected by the balance of supply and demand, we should not expect to see house prices finally stabilize until the vacancy rate returns to a more normal level. This report suggests that the market is finally moving toward that point, although it still has far to go.

The report also includes data on homeownership, which showed a further decline. Homeownership rates are now below their 1998 level. On an age-adjusted basis (older people are more likely to be homeowners), the bulk of the increase in ownership rates since the 1990-91 recession has now been reversed.

This information about the state of the housing market and homeownership would have been worth some mention, especially since so many politicians seem to view homeownership as being of great importance.


Addendum: It seems that the Wall Street Journal has heard of the Census Bureau.

Comments (4)Add Comment
George Carlin Was First to Call the Housing Bubble
written by izzatzo, February 01, 2011 6:10
All economists are indebted to George Carlin for seeing the housing bubble first, even before Dean Baker.

Carlin explained the housing bubble in a famous More Stuff Less Vacancy Theory, showing how Americans would first need more stuff, then after getting it would need a bigger house to put it in which created more wealth and a desire to consume even more stuff, which in turn lead to an even bigger house and so on.

When asked if George Carlin could predict the bubble then why didn't they take notice, economists readily explained that Carlin's model was flawed because it treated vacancy as a surplus and more stuff as a shortage which was not possible when markets clear at going prices under the Efficient Market Hypothesis.
when housing prices fall to....
written by David Cay Johnston, February 01, 2011 7:21
We will see housing prices stabilize when they are 2.5 to 3 times median income, which stopped growing a long time ago.
Lower interest rates may enable a bit higher price level, but in a sound system people can only finance mortgages equal to about 2.5 to 3 times their annual income, according to an old (and forgotten) bankers rule of thumb.
written by bosco, February 01, 2011 9:20
Are you talking about the homeowner vacancy rate? Because if you are, I think you have misread the report. The homeowner vacancy rate was 2.7% in 2010Q4, the same as it was in 2009Q4 and up a bit from the 2.5% in 2010Q3. The peak was 2.9% which was reached in the first and fourth quarters of 2008.
written by Mark, February 01, 2011 9:30
I'm still reading projections of 5-7 million more foreclosures are stuck in the pipeline as banks don't want to show their massive losses. I'm confident they are waiting to foreclose as they lobby for a sweeping tax payer bailout to, "save Wall St. in order to save Main St." and to support the "American dream."
Once these foreclosures hit, these stats will be useless.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.